What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-12 compared with 2021-08-10 · 105 added, 46 removed, 222 unchanged (40% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Assets (unaudited)

1 unchanged sentence

Cash and cash equivalents $ 5,884 $ 109

Marketable securities, available-for-sale 3,254 —

Prepaid expenses and other current assets 778 565

16 unchanged sentences

Common stock, $ 0.0001 par value;

250,000,000 shares authorized as of June 30, 2021 and December 31, 2020;

6,812,836 and 4,506,216 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

250,000,000 shares authorized as of September 30, 2021 and December 31, 2020;

6,812,836 and 4,506,216 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Additional paid-in-capital 27,536 11,145

Accumulated other comprehensive loss ( 1 ) —

Accumulated deficit ( 18,806 ) ( 12,599 )

3 unchanged sentences

Vallon Pharmaceuticals, Inc.

Statements of Operations

Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

9 unchanged sentences

Net loss ( 1,257 ) ( 1,045 ) ( 6,207 ) ( 3,353 )

Other comprehensive loss:

Unrealized loss on investments ( 1 ) — ( 1 ) —

Total comprehensive loss $ ( 1,258 ) $ ( 1,045 ) $ ( 6,208 ) $ ( 3,353 )

Net loss per share of common stock, basic and diluted

5 unchanged sentences

(in thousands, except shares)

Amount Additional Paid-in Capital Accumulated Deficit Stockholders’ Equity

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Stockholders’ Equity (Deficit)

Balance, December 31, 2019 4,506,216 $ — $ 10,991 $ — $ ( 7,777 ) $ 3,214

5 unchanged sentences

Balance, June 30, 2020 4,506,216 — 11,054 — ( 10,085 ) 969

Amount Additional Paid-in Capital Accumulated Deficit Stockholders’ Equity (Deficit)

Stock-based compensation — — 52 — — 52

Net loss — — — — ( 1,045 ) ( 1,045 )

Balance September 30, 2020 4,506,216 $ — $ 11,106 $ — $ ( 11,130 ) $ ( 24 )

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Stockholders’ Equity (Deficit)

Balance, December 31, 2020 4,506,216 $ — $ 11,145 $ — $ ( 12,599 ) $ ( 1,454 )

9 unchanged sentences

Balance, June 30, 2021 6,812,836 — 27,402 — ( 17,549 ) 9,853

Stock-based compensation — — 134 — — 134

Unrealized loss on investments — — — ( 1 ) — ( 1 )

Net loss — — — — ( 1,257 ) ( 1,257 )

Balance September 30, 2021 6,812,836 $ — $ 27,536 $ ( 1 ) $ ( 18,806 ) $ 8,729

See accompanying notes to unaudited interim financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities:

2 unchanged sentences

Amortization of finance lease right-of-use asset 55 55

Amortization of marketable securities premiums 11 —

Stock-based compensation expense 440 115

8 unchanged sentences

Investing activities:

Purchase of marketable securities ( 3,266 ) —

Purchase of property and equipment — ( 2 )

21 unchanged sentences

The Company’s lead investigational product candidate, ADAIR, is a proprietary, abuse-deterrent oral formulation of immediate-release dextroamphetamine (the main active ingredient in Adderall®) for the treatment of attention-deficit/hyperactivity disorder (ADHD) and narcolepsy.

The Company plans to develop other abuse-deterrent products, which have potential for abuse in their current forms, beginning with the development of ADMIR, an abuse deterrent formulation of Ritalin, for which the Company is conducting formulation development work.

In February 2021, the Company completed an initial public offering (IPO) of its common stock, selling 2,250,000 shares at $ 8.00 per share.

6 unchanged sentences

The Company has not generated any significant revenues from operations since inception and does not expect to do so in the foreseeable future.

The Company has incurred operating losses since its inception and has incurred $ 17,549 in accumulated deficit through June 30, 2021.

The Company has incurred operating losses since its inception and has incurred $ 18,806 in accumulated deficit through September 30, 2021.

The Company has financed its working capital requirements to date through the issuance of common stock, convertible notes, short-term promissory notes, and a Paycheck Protection Program (PPP) promissory note.

In January 2021, the Company completed a $ 350 convertible note financing and in February 2021, the Company completed the IPO, raising net proceeds of $ 15,500 .

As of June 30, 2021, the Company had cash and cash equivalents of approximately $ 10,460 , which management expects will provide funding for its ongoing business activities into the third quarter of 2022.

However, the Company has based this estimate on assumptions that may prove erroneous, and it could use capital resources sooner than it expects, therefore, there is substantial doubt about the Company’s ability to continue as a going concern within one year of the date that these financial statements are being issued.

The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its business activities, including its research and development program.

The Company’s objective is to develop and commercialize biopharmaceutical products that treat central nervous system disorders, but there can be no assurances that the Company will be successful in this regard.

Therefore, the Company intends to raise capital through additional issuances of common stock and /or short-term notes.

As of September 30, 2021, the Company had cash, cash equivalents and marketable securities of approximately $ 9,138 , which management expects will provide funding for its ongoing business activities into the third quarter of 2022.

The Company’s ability to continue as a going concern is dependent on its ability to raise substantial additional capital to fund its business activities, including its research and development program.

The Company intends to raise capital through additional issuances of common stock and /or short-term notes, but there can be no assurances any such financing will be available when needed or that the Company’s research and development efforts will be successful.

If the Company is not able to obtain additional financing on acceptable terms and in the amounts necessary to fully fund its future operating requirements, it may be forced to reduce or discontinue its operations entirely.

Therefore, there is substantial doubt about the Company’s ability to continue as a going concern.

These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

3 unchanged sentences

The December 31, 2020 balance sheet was derived from audited financial statements.

In the opinion of management, the unaudited interim financial statements furnished herein include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of June 30, 2021, and the results of operations and stockholders’ equity (deficit) for the three and six months ended June 30, 2021 and 2020 and cash flows for the six months ended June 30, 2021 and 2020.

Results of operations for the three and six months ended June 30, 2021, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2021.

In the opinion of management, the unaudited interim financial statements furnished herein include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of September 30, 2021, and the results of operations and stockholders’ equity (deficit) for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020.

Results of operations for the three and nine months ended September 30, 2021, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2021.

The unaudited interim financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements.

7 unchanged sentences

If actual results differ from the Company’s estimates, or to the extent these estimates are adjusted in future periods, the Company’s results of operations could either benefit from, or be adversely affected by, any such change in estimate.

Marketable Securities

Marketable securities consist of debt securities that are designated as available-for-sale.

Marketable debt securities are recorded at fair value and unrealized holding gains or losses are reported as a component of accumulated other comprehensive income (loss).

Realized gains or losses resulting from the sale of these securities are determined based on the specific identification of the securities sold.

An impairment charge is recognized when the decline in the fair value of a debt security below the amortized cost basis is determined to be other-than-temporary.

The Company considers various factors in determining whether to recognize an impairment charge, including the duration and severity of any decline in fair value below the amortized cost basis, any adverse changes in the financial condition of the issuers and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Stock-based Compensation

4 unchanged sentences

In considering the fair value of the underlying stock when the Company granted options, the Company considered several factors including the fair values established by market transactions.

Stock option-based compensation includes estimates and judgments of when stock options might be exercised and stock price volatility.

Stock option-based compensation includes estimates and judgments of when stock options

might be exercised and stock price volatility.

The timing of option exercises is out of the Company's control and depends upon a number of factors including the Company's market value and the financial objectives of the option holders.

8 unchanged sentences

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principals in Topic 740.

amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending the existing guidance.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending the existing guidance.

For public business entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020.

1 unchanged sentence

The adoption of this standard, effective January 1, 2021, did not have a material impact on these financial statements.

MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS

Marketable Securities

The following is a summary of the Company’s available for sale securities as of the dates indicated:

As of September 30, 2021

Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Marketable Securities:

Debt securities:

Corporate bonds $ 2,316 $ 1 $ ( 1 ) $ 2,316

Municipal bonds 939 — ( 1 ) 938

Total $ 3,255 $ 1 $ ( 2 ) $ 3,254

Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

To increase consistency and comparability in fair value measurements and related disclosures, ASC 820, Fair Value Measurement , establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.

The three levels of fair value hierarchy defined by ASC 820 are described below:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

As of September 30, 2021, all of the Company’s marketable securities were classified as Level 2 assets.

The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer.

The carrying amounts reported in the balance sheets for cash and cash equivalents, marketable securities, prepaid expenses and other current assets, accounts payable, accrued expenses, and note payable approximate their fair value based on the short-term maturity of these instruments.

The fair value of the embedded derivative liability identified in the 2021 Convertible Notes was a Level 3 fair value measurement.

As of February 12, 2021, the embedded derivative was remeasured based upon the conversion price of $ 8.00 per share upon closing of the IPO.

As such, an expense of $ 89 was recorded during the nine months ended September 30, 2021.

The following table presents the activity for the liability measured at estimated fair value using unobservable inputs for the nine months ended September 30, 2021:

Beginning balance as of January 1, 2021 $ —

Additions during the nine months ended September 30, 2021 89

Transfer out of Level 3 ( 89 )

Balance as of September 30, 2021 $ —

The following table summarizes the estimated fair value of our investments in marketable debt securities with state contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:

As of September 30, 2021

Due in 1 year $ 3,134

Due in 1-5 years 120

Due in 5-10 years —

Due after 10 years —

Total $ 3,254

ACCRUED EXPENSES

Accrued expenses consist of the following:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Research and development $ 187 $ 259

8 unchanged sentences

In January 2021, the Company was notified that the loan along with accumulated interest had been forgiven.

As a result, the Company recorded income from the extinguishment of its obligation in accordance with ASC 405-20-40-1, disclosed in the amount of $ 61 included in other income on the accompanying Statements of Operations.

result, the Company recorded income from the extinguishment of its obligation in accordance with ASC 405-20-40-1, disclosed in the amount of $ 61 included in other income on the accompanying Statements of Operations.

On January 11, 2021, the Company entered into a Convertible Promissory Note Purchase Agreement with certain existing stockholders, including Salmon Pharma, an affiliate of Medice, and David Baker, the Company’s Chief Executive Officer, pursuant to which the Company issued the 2021 Convertible Notes, for cash proceeds of $ 350 .

12 unchanged sentences

The Underwriters’ Warrants have a five -year term and are not exercisable prior to August 12, 2021.

All of the Underwriters’ Warrants were outstanding as of June 30, 2021.

The warrants were

classified as equity and the fair value of $ 399 is reflected as additional paid-in capital.

All of the Underwriters’ Warrants were outstanding as of September 30, 2021.

The warrants were classified as equity and the fair value of $ 399 is reflected as additional paid-in capital.

The Black-Scholes option-pricing model was used to estimate the fair value of the warrants with the following weighted-average assumptions:

4 unchanged sentences

STOCK-BASED COMPENSATION

The Company recorded stock-based compensation related to stock options issued under the Company’s 2018 Equity Incentive Plan (2018 Plan) in the following expense categories of its accompanying statements of operations for the three and six months ended June 30, 2021 and 2020 :

For the Three Months Ended June 30, For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2021 2020 2021 2020

3 unchanged sentences

The Company has granted stock options to purchase its common stock to employees and consultants under the 2018 Plan, under which the Company may issue stock options, restricted stock and other equity-based awards.

The Company has also granted certain stock options outside of the 2018 Plan.

The Company has also granted certain stock

options outside of the 2018 Plan.

Stock options granted by the Company generally have a contractual life of up to 10 years.

As of June 30, 2021, all equity awards granted from the 2018 Plan were in the form of stock options.

As of September 30, 2021, all equity awards granted from the 2018 Plan were in the form of stock options.

The Company measures equity-based awards granted to employees, and non-employees based on their fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period or performance-based period, which is generally the vesting period of the respective award.

1 unchanged sentence

The Company records the expense for these awards if it concludes that it is probable that the performance condition will be achieved.

The table below represents the activity of stock options granted to employees and non-employees for the six months ended June 30, 2021:

The table below represents the activity of stock options granted to employees and non-employees for the nine months ended September 30, 2021:

Number of options Weighted average exercise price Weighted average remaining contractual term (years)

3 unchanged sentences

Forfeited — —

Outstanding at June 30, 2021 663,490 $ 3.50 9.07

Exercisable at June 30, 2021 206,380 $ 2.83 8.00

Outstanding at September 30, 2021 663,490 $ 3.50 8.81

Exercisable at September 30, 2021 159,600 $ 2.92 8.01

The Black-Scholes option-pricing model was used to estimate the grant date fair value of each stock option grant at the time of grant using the following weighted-average assumptions:

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Volatility 83.50 % 85.00 %

3 unchanged sentences

Fair value of option on grant date $ 3.87 $ 4.72

At June 30, 2021, the unrecognized compensation cost related to unvested stock options expected to vest was $ 1,046 .

At September 30, 2021, the unrecognized compensation cost related to unvested stock options expected to vest was $ 912 .

This unrecognized compensation is expected to be recognized over a weighted-average amortization period of 2.82 years.

6 unchanged sentences

In January 2021, the Company entered into a Convertible Promissory Note Purchase Agreement with certain existing stockholders, including Salmon Pharma, an affiliate of Medice, and David Baker, the Company’s Chief Executive Officer, pursuant to which the Company issued the 2021 Convertible Notes for cash proceeds of $ 350 .

The 2021 Convertible Notes bore an interest rate of 7.0 % per annum, non-compounding, and had a maturity date of September 30, 2021.

The 2021 Convertible Notes bore an interest rate of 7.0 % per

annum, non-compounding, and had a maturity date of September 30, 2021.

The 2021 Convertible Notes converted into 54,906 shares of the Company’s common stock upon completion of the IPO.

5 unchanged sentences

The global COVID-19 pandemic continues to present uncertainty and unforeseeable new risks to the Company’s operations and business plan.

The Company has closely monitored recent COVID-19 developments, including states’ lifting COVID-19 safety measures, drop in vaccination rates, and spread of various coronavirus strains such as the Delta variant.

In light of these developments, the full impact of the COVID-19 pandemic on the Company’s business, operations and clinical development plans remains uncertain and will vary depending on the pandemic’s future impact on its clinical trial enrollment, clinical trial sites, CROs, third-party manufacturers, and other third parties with whom we do business, as well as any legal or regulatory consequences resulting therefrom.

The Company has closely monitored recent COVID-19 developments, including the lifting of COVID-19 safety measures, the drop in vaccination rates, the implementation of, and reaction to, vaccine mandates, the spread of various coronavirus strains such as the Delta variant, and supply chain and labor shortages.

In light of these developments, the full impact of the COVID-19 pandemic on the Company’s business, operations and clinical development plans remains uncertain and will vary depending on the pandemic’s future impact on the Company’s clinical trial enrollment, clinical trial sites, CROs, third-party manufacturers, and other third parties with whom we do business, as well as any legal or regulatory consequences resulting therefrom.

To the extent possible, the Company is conducting business as usual, with necessary or advisable modifications to employee travel and with most of its employees and consultants working remotely.

The Company will continue to actively monitor the COVID-19 outbreak and may take further actions that alter its operations, including those that may be required by federal, state or local authorities, or that the Company determines are in the best interests of its employees and other third parties with whom the Company does business.

FAIR VALUE MEASUREMENTS

The fair value of the embedded derivative liability identified in the 2021 Convertible Notes was a Level 3 fair value measurement.

As of February 12, 2021, the embedded derivative was remeasured based upon the conversion price of $ 8.00 per share upon closing of the IPO.

As such, an expense of $ 89 was recorded during the six months ended June 30, 2021.

The following table presents the activity for the liability measured at estimated fair value using unobservable inputs for the six months ended June 30, 2021:

Beginning balance as of January 1, 2021 $ —

Additions during the six months ended June 30, 2021 89

Transfer out of Level 3 ( 89 )

Balance as of June 30, 2021 $ —

The Company will continue to actively monitor the COVID-19 pandemic and may take further actions that alter its operations, including those that may be required by federal, state or local authorities, or that the Company determines are in the best interests of its employees and other third parties with whom the Company does business.

SUBSEQUENT EVENTS

On November 1, 2021, the Company was named as a defendant in a putative class action lawsuit filed in the California Superior Court, County of Los Angeles, styled Rendon v.

Vallon, Inc., et al .

The complaint brings one claim for violation of California’s Unruh Civil Rights Act (“Unruh Act”), alleging that the Company’s website is not compatible with software used by vision-impaired individuals.

In the Complaint, Plaintiffs seek:

(a) a declaration that the Company violated the Unruh Act;

(b) an injunction ordering the Company to ensure its website is in compliance with the Unruh Act;

and (c) statutory damages of $ 4 , plus reasonable attorneys’ fees.

The complaint expressly limits the total amount of recovery sought, including statutory damages, attorneys’ fees and costs, and cost of injunctive relief, to not exceed $ 75 .

The Company believes the claim to be without merit.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements